Chinese Monthly Update – 22 March 2013

China Economic Update

In this months economic update we revisit our outlook for the Chinese economy and what we can expect to see from the People’s Bank of China over the forecast horizon. The PBOC is in for another big year as it continues to face not only a challenging global environment, but an anticipated recovery in the domestic economy that we bring with it the renewed threat of inflation and overheating pressures. Markets will also be watching the central bank closely to see if it can maintain (or even ramp up) the progress of gradual financial development seen in recent years.

For some time now our expectation has been that the government’s recent program of investment stimulus would help to jump start the economy in H1 2013, before tapering off in the later stages of the year as public spending was scaled back and was only partly offset by improving external and private domestic demand. While we still see this as the most likely scenario for the growth trajectory, recent partial indicators suggest that the anticipated acceleration in growth may not be as robust as previously thought (see note). However, it is also important to keep in mind that the first quarter of the year is often heavily affected by Lunar New Year – particularly true this year due to the change in timing from 2012 – while the current leadership transition may still be having some lingering impacts on the economy. Consequently, we are reluctant to change our growth forecast significantly – our anticipated recovery was always more subdued than most other forecasters – but we have made some marginal changes to our expectations for monetary policy over the next 12 months.

About the Author

James joined NAB early in 2011 from the Reserve Bank of Australia where he worked for four years. He was involved in analysis of overseas economies and commodities, as well as business investment and residential property within Australia.

Before this, James taught economics at the University of Western Sydney, and was employed as an economic forecaster with Integral Energy.

He graduated from the University of Western Sydney (with first class honours in Economics) and was a recipient of the Honours Economic Society Award (HESA) in 2006. James also holds a Bachelors degree in Law.

At NAB, James is responsible for monitoring and forecasting the emerging Asian economies with a particular emphasis on China, and is also a member of the commodities team.